News from the CSR and ESG World

Morgan Stanley Raises US$ 125MM for 1st Global Impact Fund (Feb 2018)

Morgan Stanley Investment Management has raised more than $125 million in final commitments for its first global impact fund, PMF Integro. Launched in partnership with the Morgan Stanley Institute for Sustainable Investing, Integro invests in private equity funds that offer a combination of attractive financial returns with positive environmental impact, social impact or both. The fund is managed by AIP Private Markets, the private markets solutions team within Morgan Stanley Investment Management. Read more

CONNEXIS is actively involved in the development of the new ISO ESG standards, especially ISO 14030 & ISO 14097 around climate finance and ISO 14008 & 14007 around environmental impact assessment. Read more

Companies can contribute to positive social and economic development when they involve stakeholders, such as local communities, in their planning and decision making. This is particularly true in the extractive sector, which is associated with extensive social, economic and environmental impacts. The OECD has therefore prepared new due diligence guidelines for meaningful stakeholder engagement in the extractive sector intended to provide practical guidance to mining, oil and gas enterprises in addressing the challenges related to stakeholder engagement. Read more

72% of Companies do not Account for Financial Risks of Climate Change (Oct 2017)

In its 25th issue KPMG's Survey of Corporate Responsibility Reporting reveals that 72% of large and mid-cap companies worldwide don’t acknowledge the financial risks of climate change in their annual financial reports. The study is based on 4,900 companies worldwide, comprising the top 100 companies by revenue in each of the 49 countries researched in this study. Read more

In a new 5-year study (ERC FINEPRINT), the Sustainable Resource Use team at the University of Economics in Vienna (Austria) analyzes the environmental and social footprint of Europe’s resource consumption. While the consumption of raw materials within Europe has decreased over recent years, the import of raw materials and raw-material intense products into Europe continues to increase. FINEPRINT will develop a spatially explicit foot­print model, which will allow tracing products consumed in European countries back to the precise geographical location where specific environmental and social impacts related to raw material extraction take place. The assessment will be carried out for at least 60 raw materials on a global scale, covering biomass from agriculture, fossil fuels, metal ores and industrial minerals. From October 2017, more information will be available at the project website.

The Swiss chocolate industry, in particular represented by the industry association Chocosuisse and the Secretariat for Economic Affairs (SECO), have set up a platform with NGOs Swisscontact and Helvetas to promote sustainability in the cocoa sector. Together with several Swiss companies and research institutes, they signed a declaration of intent and formulated ten strategic goals. The core element of the platform is the target to procure 80% of the imported cocoa-based products from sustainable production sources by 2025. Read more (German source)

On May 12th Occidental Petroleum Corp.’s shareholders approved a proposal to require the oil and gas exploration company to report on the business impacts of climate change, marking the first time such a proposal has passed over the board’s objections.

The resolution, initiated by a group of investors including the California Public Employees’ Retirement System (CalPERS), received more than 50 % of the votes at Occidental’s shareholder meeting in Houston, according to spokesmen for the company and Calpers.

The proposal received the backing of Occidental’s largest shareholder, $5.4 trillion asset manager BlackRock Inc. BlackRock, which owns a 7.8 percent stake in the oil explorer, said it took action due to the "lack of response" on the issue by the company and a lack of improvement in its climate-change related reporting following a similar proposal last year which received more than 40 percent support. Read more

Europe continues to be the dominant market for sustainable investment, with a share of 53%, followed by the US with 38%. The fastest growing countries are Japan and Australia/New Zealand.

Negative/exclusionary screening remains the largest sustainable investment strategy, affecting $15.02 trillion in assets, followed by the integration of Environmental, Social & Governance (ESG ) issues, applied to $10.37 trillion in assets and corporate engagement/shareholder action ($8.37 trillion) Read more

Member States must implement new EU Guideline by December 6th, 2016 (November 2016)

The new EU Directive on non-financial reporting (NFRD) has to be implemented by all EU Member States by December 6th, 2016. As a consequence all Public Interest Entities (PIEs)
with more than 500 employees will have to report certain environmental and social data in their annual statements beginning with the reporting year 2017. For more details on the new directive
and our services to comply with the new regulation please see here.

The German government has adopted new regulation that obliges so called Public Interest Entities (PIEs) to report on their Corporate Social Responsibility. PIEs include all stock exchange listed companies as well as banks and insurance companies with more than 500 employees. These PIEs will have to report on their material risks concerning employees, social and environmental issues, as well as human rights and corruption. The new regulation will be applied starting with the reporting year 2017. By implementing this new regulation Germany follows a new EU Guideline that is expected to affect 1000s of companies throughout the EU. Read more

Banks' withdrawal from coal is having an immediate impact. After sector pressures forced Alpha Natural Resources into bankruptcy in August 2015, the lack of financing from banks to let the company exit Chapter 11 led the company to sell more assets as it continues its restructuring.
On March 16th, coal producer Peabody Energy skipped an interest payment due March 15, warning investors it faces potential bankruptcy. "We also believe that in current markets the likelihood of a major asset sale at a multiple sufficient to allow deleveraging also looks more and more remote," analysts wrote in their report.
Read more

Wall Street Exits US Coal Financing (February 2016)

Under pressure from US government officials and environmental advocacy groups, a growing number of top financial services firms are scaling back their financing of coal mining operations. Banks such as Morgan Stanley, Wells Fargo, Citigroup, Goldman Sachs and Bank of America announced commitments to back away from financing the coal industry. The White House this year issued a moratorium of new leases for coal mined on federal lands. California pensions, under Gov. Jerry Brown's 2015 law, will divest from investments in coal companies by mid-2017.

OECD New Sector Understanding (December 2015)

In line with commitments by members of the Organization for Economic Cooperation and Development (OECD) to drive down their own domestic emissions of greenhouse gases, OECD participants in the Arrangement on Officially Supported Export Credits agreed a new sector understanding on 17 November 2015 to limit their financial support for the development of coal-fired electricity generation projects abroad (the New Sector Understanding). As export credit agencies from OECD countries provided nearly half of the financing for coal projects between 2007 and 2014, the New Sector Understanding represents a significant diplomatic feat achieved ahead of the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Paris in December 2015.

France bans planned obsolescence (October 2015)

On October 14th 2104 the French parliament passed a law that will make planned obsolescence a crime in France, threatening up two years in prison and up to EUR 300,000 in fines. Under the new law, which will come into effect in 2016, companies and their employees can be held accountable for the planned failure of consumer products, if a deliberate limitation of the lifetime of the product can be proven. The law is part of France's new policy to reduce its energy consumption by 50% until 2050. A study from 2013 estimates the annual damages resulting from planned obsolescence in Germany alone at EUR 100bn. Read more

BoE Governor Carney says firms must be more open about carbon footprint (October 2015)

Bank of England Governor Mark Carney said on Tuesday that companies must be more open about their "climate change footprint" to avoid abrupt changes in asset prices that could destabilise markets. The speed at which assets such as coal, oil and gas reserves are re-priced to reflect the impact of climate change is vital to reduce potentially "huge" financial risks to British insurers and other investors, he said. "Risks to financial stability will be minimised if the transition begins early and follows a predictable path" Carney told a Lloyd's of London insurance market event.

The goal of limiting global temperature rises to two degrees above pre-industrial levels would render the vast majority of fossil fuel reserves "stranded" or unburnable without expensive carbon capture technology, he said. Carney, who made no comment on UK monetary policy, also heads the Financial Stability Board (FSB), which coordinates financial regulation for the Group of 20 economies (G20).

At a meeting in London last week, the FSB agreed to consider recommending to G20 leaders in November that more should be done to develop consistent, comparable, reliable and clear disclosures by companies on the "carbon intensity" of their assets, he said.

Such disclosures would show investors how companies will manage risks from climate change.

New 'Cooperative Bank for the Common Good' founded in Austria (September 2015)

At the end of 2014 a new cooperative bank was founded in Austria. The bank aims to follow the initial ideas of Friedrich Wilhelm Raiffeisen who formulated his motivation to establish a new bank cooperative in 1872: "A cooperative should serve the needs of its members as much as the needs of society."

As a consequence the new bank wants to primarily promote and support socially responsible projects and has no plans to pay dividends to its members and owner, says Robert Moser, founder and President of the new bank.

So far the cooperative has raised EUR 1.5MM of the necessary EUR 6MM equity it needs to apply for a banking license in Austria. Mr. Moser is confident that the cooperative will be able to apply for its banking license in early 2016. Read more

SEC Adopts CEO Pay Ratio Rule, Five Years After It Became Law (August 2015)

A new federal rule will require public companies to list their chief executives' total annual compensation as a ratio to their workers' median pay, after the Securities and Exchange Commission adopted the rule in early August. The new vote comes five years after Congress approved the Dodd-Frank Wall Street Reform and Consumer Protection Act, which included the pay ratio rule. The new rule will come into effect in 2017 and is widely expected to increase transparency around workers' and CEO compensation.

Small Breakthrough on the Road to Paris (July 2015)

In a recent interview the Chief Negotiator of France – Laurence Tubiana – summarized the latest preparatory meeting for the UNFCCC Conference of the Parties (COP 21) in Paris (November 2015) as a significant breakthrough. According to Ms. Tubiana the negotiations had taken a major turn for the better. The 46 participating countries agreed that the new climate accord needs to provide a permanent solution for carbon emissions and a mechanism to continuously increase future reduction targets. In combination with a principal agreement between the world’s leading emitters USA and China from late 2014 to commit to binding reduction targets, this latest accord increases the hopes for the Paris conference in November.

OECD Issues New PFI (June 2015)

In June the 34 OECD members agreed on a new Policy Framework for Investment (PFI) with an increased focus on SMEs as well as global supply chains. The new PFI also addresses gender equality issues as well as political measures to direct investment towards environmental growth. The OECD offers the PFI as a global reference for investment policy and development co-operation, supplementing its existing Guidelines for Multinationals as well as the G20/OECD Principles for Long Term Finance by institutional investors.

For their latest publication (Reputational Risk in Private Equity Index, RRIPE, May 2015) UK Private Equity (PE) consulting firm Pivot Partners asked over 100 Limited Partners (LPs) about their primary reputational risk and ESG concerns in their investment decisions.Out of 24 ESG issues the LPs ranked bribery as their primary concern, “concealing bad news from investors” as the second most important issue and “Providing unsafe work conditions” as third most important risk. By contrast deforestation, fracking and “Polluting the Environment” are the highest ranked environmental risks at position 11, 12 and 16. Portfolio performance leads the additional factors that influence investment decisions, followed by labor standards and integrity. The authors also note that family offices seem to be less concerned about the tested risks: 10 of the 24 risks scored lowest among family offices.

SRI Volume Jumps 47% in German Speaking Countries

According to the Forum on Sustainable Investment (FNG) the volume of sustainable investment in Germany, Austria and Switzerland grew by 47% to EUR 197.5bn in 2014.“Exclusion criteria, the best-in-class approach and the integration of sustainability criteria into traditional financial analysis remain the most important approaches” says Claudia Tober, FNG’s Executive Director. “While impact investment ranked lowest in terms of volume, it has made particularly strong gains, achieving growth of 74%.” FNG has been recording this particular strategy since 2011.In 2005 FNG had issued its first market report on sustainable investment and the latest report (2015) now marks a full decade of reporting on sustainable investment in Germany, Switzerland and Austria. Over this period the market has grown 15-fold.

All parties in Norway’s Standing Committee on Finance and Economic Affairs agreed on May 28th that Norway's sovereign investment fund - the world's largest - will divest from companies that draw more 30% of their income from the coal industry. The new agreement is expected to become law on June 5, 2015 and lead to a divestment of US$ 4.5bn.

This decision follows a similar decision in the week preceding the Norwegian decision, where French insurance group Axxa also decided to divest from coal. Other large banks, such as Credit Agricole of France and Bank of America, will reduce their loans to the coal industry. More and more investors begin to realize that coal is not only an environmentally damaging investment, but also a more and more risky one.

Barclays Bank Exits Mountain-Top-Removal (March 2015)

Barclays Bank has been one of the largest financiers of the coal mining industry and especially of the practice of Mountain Top Removal (MTR). The practice of MTR - where entire mountain tops are removed by explosives to access coal inside the mountain - is under heavy criticism for its environmental impact, primarily deforestation and the pollution of watercourses.

In April 2014 protestors organized by the World Development Movement (WDM) – an independent association of campaign groups across the UK – targeted the annual general meeting of Barclay’s Bank in London, especially challenging the bank’s involvement in MTR.

In a stunning reversal, Barclays issued a quiet policy paper in March 2015, announcing the Bank’s exit from financing MTR.

Starbucks To Spend US$250 Million On Free College For Every Employee

Starbucks Coffee just announced a commitment of up to $250 million to ensure that each of its U.S. employees – whether full or part-time – can go to four years of college and graduate without any tuition debt. Read more

UPDATE: According to Forbes Magazine Starbuck's recent commitment of up to $250 million to ensure that its U.S. employees can graduate without any tuition debt has turned into a very successful recruiting and retention tool. Read more